[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
UNFAIR TRADE PRACTICES: ADDRESSING BARRIERS FACING SMALL BUSINESS
EXPORTERS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
MAY 22, 2014
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 113-070
Available via the GPO Website: www.fdsys.gov
__________
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
BLAINE LUETKEMEYER, Missouri
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JAIME HERRERA BEUTLER, Washington
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
DAVID SCHWEIKERT, Arizona
KERRY BENTIVOLIO, Michigan
CHRIS COLLINS, New York
TOM RICE, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRAD SCHNEIDER, Illinois
RON BARBER, Arizona
ANN McLANE KUSTER, New Hampshire
PATRICK MURPHY, Florida
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Scott Tipton................................................ 1
Hon. Patrick Murphy.............................................. 2
WITNESSES
Mr. Milton Magnus, President, M&B Metal Products Company, Inc.,
Leeds, AL, testifying on behalf of the American Wire Producers
Association.................................................... 4
Mr. Peter Jhones, Legal Advisor, Spyderco, Golden, CO............ 6
Mr. Don Shawcroft, Owner, Jon B. Shawcroft Ranches, Alamosa, CO,
testifying on behalf of the Colorado Farm Bureau............... 8
Mr. Timothy C. Brightbill, Partner, Wiley Rein, LLP, Washington,
DC............................................................. 10
APPENDIX
Prepared Statements:
Mr. Milton Magnus, President, M&B Metal Products Company,
Inc., Leeds, AL, testifying on behalf of the American Wire
Producers Association...................................... 20
Mr. Peter Jhones, Legal Advisor, Spyderco, Golden, CO........ 30
Mr. Don Shawcroft, Owner, Jon B. Shawcroft Ranches, Alamosa,
CO, testifying on behalf of the Colorado Farm Bureau....... 47
Mr. Timothy C. Brightbill, Partner, Wiley Rein, LLP,
Washington, DC............................................. 53
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
UNFAIR TRADE PRACTICES: ADDRESSING BARRIERS FACING SMALL BUSINESS
EXPORTERS
----------
THURSDAY, MAY 22, 2014
House of Representatives,
Committee on Small Business,
Subcommittee on Agriculture, Energy and Trade,
Washington, DC.
The Subcommittee met, pursuant to call, at 9:31 a.m. in
Room 2360, Rayburn House Office Building, Hon. Scott Tipton
[chairman of the Subcommittee] presiding.
Present: Representatives Tipton, Luetkemeyer, Bachus, Meng
and Murphy.
Chairman Tipton. Well, good morning. I want to thank
everyone for taking time to be able to be here, and this
hearing will come to order.
I would like to be able to thank our witnesses for taking
time away from your full-time jobs for this important hearing
and we do look forward to your testimony.
As we celebrate World Trade Month, this is an ideal time to
review our trade policy initiatives and the effects on small
businesses here in the United States.
Currently there are a variety of trade policy initiatives
in the pipeline, including ongoing negotiations with Trans-
Pacific Partnership, the Transatlantic Trade and Investment
Partnerships and the possible renewal of Trade Promotion
Authority. These initiatives will directly or indirectly affect
the way small firms compete and operate in the global economy.
Exports are a significant contributor to the United States
economy, helping to support millions of good paying jobs in
trade and competing industries.
In 2013, the United States exported nearly $2.3 trillion in
goods and services, an all-time high. Small businesses account
for a substantial share of this value. According to statistics
from the United States Census Bureau, approximately 97 percent
of exporting businesses are small and medium sized businesses.
While legal trade can confirm many benefits for small
businesses and the economy, the opposite is true, when foreign
nations and companies refuse to play by the established rules.
Particularly unfair and predatory trade practices like dumping
and intellectual property theft can result in substantial
monetary harm to small businesses in trade competing
industries. In addition, an inability to be able to protect
your intellectual property rights can stifle the innovation
necessary to come up with further technological advances.
Remedies exist for small businesses to fight these unfair
trade practices. Unfortunately in too many cases, the cost and
complexity involved in fighting unfair foreign trade practices
are beyond the means of most small businesses.
A recent report from the Government Accountability Office
highlighted some of these challenges, noting that the cost of
pursuing antidumping and countervailing duty cases at between
$1- and $2 million. I have no doubt that the U.S. small
businesses can compete with any company in the world. As we
review the current trade agenda, we need to take a dual
approach of improving coordination of domestic Federal agencies
and strengthening our enforcement against unfair trade
practices to ensure a level playing field for all small
businesses.
Again I want to thank our witnesses for participating in
today's hearing, and I would like to recognize our ranking
member for his opening statement.
Mr. Murphy.
Mr. Murphy. Thank you, Mr. Chairman. I want to thank you
for putting this all together today, and thank you for calling
this very important hearing.
I also want to thank the witnesses for being here and
testifying on this very important issue. I am sure we all wish
that votes were not interfering this morning, but I am looking
forward to listening to your comments and understanding how
unfair trade practices are hurting American small businesses
and what we can do to alleviate these problems.
Reducing trade barriers and expanding free movement of
capital, goods and services has transformed the U.S. economy
and enabled the rise of global economy that has created new
markets and expanded American access to emerging markets. The
resiliency of small businesses has accounted for two-thirds of
all new jobs created.
In 2011 alone, small businesses accounted for 97 percent of
the total number of U.S. exports. Over 200,000 small businesses
are sending American products to every corner of the globe,
reducing our trade deficit to the lowest levels in a decade and
spurring a revival in the U.S. manufacturing sector. Although
small firms have increased exporting in recent years, they
still face several challenges accessing foreign markets. The
main barrier seems to be the lack of information and an unclear
understanding of where to start. Nearly half of small business
exports spend a minimum of three months to nearly 10 percent of
their annual operating revenue just preparing to export.
The Export-Import Bank and the Small Business
Administration have been vital to promoting the success of
these companies by providing needed capital, one-on-one
counseling, and access to foreign markets. I am hopeful that
idealogical crusades do not get in the way of reauthorizing Ex-
IM so that small business owners can continue to be at the
forefront of global trading. While the Federal Government
offers numerous trade promotion programs, more collaboration
and outreach is necessary to ensure these services are
accessible by the firms that need them the most.
Unfair trade practices remain a major concern of U.S.
workers as America debates new trade liberalization agreements
in TPP, TTIP and TISA. These agreements have the potential to
open new avenues for exporting around the world by lowering
tariffs and harmonizing regulations.
The benefits are not without cost however, and some
provisions remain controversial. It is our job here in Congress
to promote U.S. interests and see that our trade objectives are
met. As negotiations progress, we will be watching closely.
Issues such as currency manipulation, unacceptable labor and
environmental standards, anticompetitive state-sponsored
subsidies, dumping of goods in the U.S. below market value, and
intellectual property rights violations, are all serious
problems that need to be addressed to preserve American small
business competitiveness in the global stage. Hopefully, this
hearing will provide insight into addressing these obstacles.
Again, I want to thank the chairman, and I want to thank
the witnesses; and I apologize that votes are going to take us
away this morning.
Thank you.
Chairman Tipton. Thank you, Mr. Murphy.
If the committee members have an opening statement
prepared, I ask that they submit it for the record.
I would like to be able to take a moment to be able to
explain our timing lights for you. Each of you will have five
minutes to be able to deliver your testimony. The light will
start out as green. When you have one minute remaining, the
light will turn yellow, and finally at the end of your five
minutes, it will turn red. I would ask that you would try to
adhere to the time limit if you can, and we will let you
summarize at that point.
I would now like to yield to our colleague, Mr. Bachus, so
that he may introduce our first witness.
Mr. Bachus. Thank you, Chairman Tipton, also Ranking Member
Murphy, for allowing me this privilege.
Milton Magnus is a spokesman for both his company and the
American Wire Products Association. He serves as their
president. He is President of M&B Metal Products in Leeds,
Alabama. He is a third leading job supplier or employer in that
town of 12,000 people. I can't imagine Leeds without M&B
Hangers. What they do is they produce coat hangers. You will
find that he is a very knowledgeable witness about the impact
of unfair and illegal trade practices and their devastating
effect on small and medium sized businesses that are really the
backbone of our economy. They supply 70 percent of our jobs.
He has just about been put out of business by illegal
dumping from China. That is the bottom line. Most of his
competitors in the United States are out of business, and the
incredible thing is they put them out of business, the American
companies, and then they buy their equipment and sometimes take
it to China or just put it out of production. They buy it
because they--and they have eliminated most of the domestic
production.
Our office has worked with him for years. He has hired
private investigators. He has documented with pictures,
transshipping, dumping, where they actually put on a box that
it is made in Vietnam, and they ship it directly from China. He
has had pictures of where they claim the production is in
Vietnam, and all it is, is a small shack with absolutely
nothing there--and let me say this; I have always voted for
free trade. I have been an advocate of free trade, but this
sort of foolishness turns people against fair trade and makes
people resist it. And if we are going to continue to be a
trading Nation and negotiate these agreements, which I think we
have to, the bottom line is we have to enforce them.
Some of our competitors don't play by the rules, don't even
make a pretense of doing it and some of us, I think, have been
the advocates of free trade with some countries unless they
change their ways, I am afraid we just can't, there is just no
way to promote trade with people who don't play by the rules.
So thank you again. Mr. Murphy and I are both going back to
Financial Services for a markup, so thank you for the privilege
of testifying.
And he will tell a horrifying story. Unfortunately, several
of his colleagues in the business are no longer in business
because they just simply didn't survive what he has gone
through.
Thank you.
Chairman Tipton. Thank you, Mr. Bachus.
And Mr. Magnus, thank you for appearing here today, and we
appreciate you and look forward to your testimony.
STATEMENTS OF MILTON MAGNUS, PRESIDENT, M&B METAL PRODUCTS
COMPANY, INC., LEEDS, AL, TESTIFYING ON BEHALF OF THE AMERICAN
WIRE PRODUCERS ASSOCIATION; PETER JHONES, LEGAL ADVISOR,
SPYDERCO, GOLDEN, CO; DON SHAWCROFT, OWNER, JON B. SHAWCROFT
RANCHES, ALAMOSA, CO, TESTIFYING ON BEHALF OF THE COLORADO FARM
BUREAU; AND TIMOTHY C. BRIGHTBILL, PARTNER, WILEY REIN, LLP,
WASHINGTON, D.C.
STATEMENT OF MILTON MAGNUS
Mr. Magnus. Thank you, Chairman Tipton.
Thank you, Representative Bachus for your words and your
friendship.
I am testifying today to explain the constant struggles
small and medium size manufacturers face with unfair trade. In
2002 my company, along with two other U.S. hanger producers,
saw a flood of Chinese-made hangers entering the United States
at below our cost. We decided to file a Section 421 trade case,
which is one avenue for relief for U.S. producers that are
being harmed by imports from China. We were successful in our
trade case at the ITC, but unlike an antidumping or
countervailing duty case, a Section 421 case has to go to the
President for approval.
Unfortunately no relief was granted. Shortly after that,
Cleaners Hanger Company, an American company which was the
largest garment hanger producer in the world, filed for Chapter
7 bankruptcy. Then it seemed like dominoes. All of the
remaining U.S. hanger producers with the exception of M&B
either went out of business or closed their U.S. operations and
imported all their hangers from China.
Over the next few years we struggled having to close our
plant in South Hill, Virginia and lay off 85 hardworking
Americans. We continued our struggle, but the Chinese were
relentless, and eventually we had to either import 100 percent
of our hangers or fight by filing an antidumping petition
against China. We chose to fight.
On July 31, 2007, we filed an antidumping petition against
Chinese hangers. When we filed we were almost out of business,
and we really didn't know how we were going to pay the
substantial legal fees and other costs to file this case, but
we proceeded. After a long and demanding process before the ITC
and Commerce, dumping duties ranging from 16 to 187 percent
were imposed on imported hangers from China. Things improved,
and we were able to pass along raw material increases. But just
as we were hiring again, increase in our production, the same
producers that were shipping hangers from China were working on
illegal schemes to avoid dumping duties by shipping their
hangers through other countries or simply just changing the
company of origin on the paperwork.
We filed over 30 e-allegations with Customs with specific
information about these illegal schemes. We met with Customs
officials on a number of times detailing what was happening,
but we saw no progress.
We then hired an investigator at great cost to our small
company and sent him to Taiwan and Vietnam to visit these so-
called new factories that were shipping hundreds of millions of
hangers to the United States. He didn't find any hanger
factories, but he did receive detailed offers from Chinese
producers to illegally transship hangers to the United States
through Taiwan and Vietnam avoiding the dumping duties that
should have been collected.
When our investigator returned, we took him, his reports
and our attorneys and met with Customs, as well as Immigrations
and Customs Enforcement, or ICE, to detail the schemes. I felt
really good when we left the meeting, but with the exception of
one small importer transshipping Chinese hangers through
Mexico, nothing happened.
We then filed anti-circumvention petitions against two so-
called hanger producers in Vietnam. We won those cases, too,
but with the help of the Chinese producers, hanger imports from
Taiwan and Vietnam continued to grow. We had no choice but to
file an antidumping case against Taiwan and antidumping and
countervailing duty cases against Vietnam. We won those cases
as well, but immediately hangers started appearing from Laos
and Malaysia. We have been told these hangers are made in
Vietnam or China and transshipped to the United States. We
decided not to file any more e-allegations or send
investigators to these countries to bring back proof of duty
evasion because we saw no results from our previous efforts.
M&B along with U.S. producers suffering from the same
evasion schemes formed a coalition to try to get meaningful
legislation passed to address these illegal activities. The
Enforcing Orders and Reducing Customs Evasion, or ENFORCE Act,
creates a procedure at Customs to investigate claims of evasion
including timelines for Customs to make determinations and
apply the appropriate duties as well as regular and timely
reports that will not only deter future evasion, but add
transparency, accountability and oversight where there
currently is none. The provisions of ENFORCE passed the Senate
Finance Committee by voice vote and have been included in the
Senate Customs Reauthorization bill. The complimentary bill in
the House, introduced by Representatives Long and Sanchez, has
a bipartisan group of 46 cosponsors.
There are many other industries that face the same
struggles with cheating, illegal transshipping, and evasion of
their orders. They include industries making nails,
innersprings, threaded rod, PC strand, wire shelving, and many
more. We all produce with a high degree of integrity, which
includes paying our workers a fair wage with good benefits,
being environmentally responsible, paying taxes, and providing
a return on investments. Without meaningful relief from ongoing
duty evasion schemes, it will be difficult to maintain our U.S.
production.
Thank you for your time, and I welcome any questions.
Chairman Tipton. Thank you, Mr. Magnus.
Our next witness is Mr. Peter Jhones. He serves as legal
advisor to Spyderco, a manufacturer of utility knives based in
Golden, Colorado. Spyderco is a family-owned enterprise started
in 1981 and currently exports its products to over 60
countries.
Mr. Jhones, thank you for appearing here today, and we look
forward to your testimony. Please begin.
STATEMENT OF PETER JHONES
Mr. Jhones. Thank you.
Chairman Tipton, Ranking Member Murphy, members of the
Subcommittee, thank you for your invitation to appear today.
I am Peter Jhones, Manager of Research and Development at
Spyderco, Inc. The company has designed and manufactured and
distributed some of the highest quality and most innovative
folding knives and related products in the world. Spyderco was
built from nothing by its founder Sal Glesser and his family.
It now employs more than 80 individuals in Golden, Colorado,
generates $20 million annually, and has been awarded more than
190 pieces of intellectual property worldwide.
Customers have come to rely upon the high performance,
superior engineering and ergonomic designs of Spyderco's
products. These customers include virtually all of this
country's military branches, special services, law enforcement
personnel, and are in service at every level of state and local
law enforcement. We sell our products through the United States
and to 57 countries around the world. A significant portion of
our manufacturing is performed in Golden, and we are in the
process of tripling that capacity.
The safety and reliability of the tools used by our
country's servants should not be called into question. However,
that is exactly what is now happening. An alarming increase in
counterfeits, knock-offs and infringing product is flooding the
United States market by Chinese companies. The Chinese
counterfeits are anything but an exact duplicate of a genuine
item. These products are made of inferior materials,
demonstrate poor manufacturing techniques, making for a
dangerous and unreliable tool for service personnel and the
consumer alike. These copies have achieved a level of outward
appearance that makes it difficult for even our own staff to
tell a genuine product from a fake.
Spyderco does its best to police the marketplace seeking to
remove copies from the stream of commerce. For the most part
Spyderco has been successful in these activities, stemming the
flow of counterfeit goods being sold through United States
sales entities. However, it is having difficulty stopping the
sales of counterfeit products sold through Chinese distribution
outlets. Indeed, the bulk of these copies are entering the
stream of commerce through online auction sites, primarily
Alibaba, TaoBao and DHgate. These Chinese owned sites have a
very poor or no response to requests to remove auctions of
infringing goods.
In contrast, the famous online auction house eBay has
developed their Verified Rights Owner program to combat just
this issue. Although utilizing more of a storefront format,
Amazon.com also keeps a tight rein on infringing products
preventing their entrance into the Amazon.com stream of
commerce.
Costs associated with trying to remove unauthentic products
from Chinese sales Web sites is now prohibitive. As with all
small business operations, availability of funds to fight an
infringement war are restricted. Every dollar diverted for an
effort to protect the marketplace from unsafe counterfeits and
patent infringements takes money from corporate activities such
as research and development, increasing production capacity,
additional employees, machinery acquisition, wage increases, et
cetera. As a result copies of many of our core products are now
available on these sites at significantly lower prices than for
which our genuine products can be offered.
As I am sure we all realize, it is impractical for U.S.
Customs and Border Patrol to inspect every package coming into
this country. If all manufacturers selling products in America,
domestic and international alike, were subject to the same
intellectual property enforcement standards, this problem would
be alleviated. All internet auction sites should be required to
have an infringement notification and removal system that
works. This would level the playing field between the U.S. and
Chinese owned internet auction and commerce sites. It would
also provide an ideal point for IP holders to review and stop
the offer for sale of infringing items being put into commerce
worldwide.
Spyderco agrees it is important for the United States to
continue embracing free trade principles with our trading
partners. However, it is imperative that these partners respect
and enforce American intellectual property rights regardless of
importation venue. Spyderco respectfully requests this
Subcommittee and the United States Congress to implement laws
and treaties which require all Web sites viewable within the
United States to publish and enforce strong intellectual
property protection mechanisms and to require trading partners
to respect and enforce American intellectual property rights.
Thank you.
Chairman Tipton. Thank you, Mr. Jhones. Good to see a
fellow Coloradan here.
And it is now a pleasure of mine to also be able to
introduce another fellow Coloradan and also a constituent of
mine who has a product that I think it is important for any of
us who like to be able to eat in this country.
Representing a lot of our farm and ranch communities in
terms of his property in Alamosa, Colorado, our next witness is
Mr. Don Shawcroft. He is owner of Jon B. Shawcroft Ranches in
Alamosa, Colorado. If you haven't been there, one of the most
beautiful places in the country and certainly a delight to
visit.
In addition to operating a small cattle operation, Mr.
Shawcroft also serves as President of the Colorado Farm Bureau
and has been a great advocate on behalf of our farm and ranch
community, and I appreciate you taking the time to be able to
be here today to testify; and please continue.
STATEMENT OF DON SHAWCROFT
Mr. Shawcroft. Thank you, Chairman Tipton, members of the
Subcommittee. Thank you for holding this hearing.
I am Don Shawcroft, President of the Colorado Farm Bureau,
a fourth generation rancher from the San Luis Valley of
southern Colorado and a board member of the American Farm
Bureau Federation. Farm Bureau is, in fact, the largest
agricultural based grassroots organization in the country with
a membership of over 6 million farm and ranch families growing
everything imaginable from alligators, to children, to
grandchildren, and even to zucchini.
Trade is vitally important to agriculture on the U.S.
economy. According to USDA's Economic Research Service, the
$136.4 billion of agricultural exports in 2011 produced an
additional $176 billion of economic activity in the United
States, including 637,000 jobs in the non-farm sector. Ag
exports helped offset some of the nonagricultural U.S. trade
deficit and are a significant market for Ag products from
Colorado and the rest of the Nation.
Agricultural trade could and will be more significant if
and when it is unfounded upon and the SPS issues a non-tariff
trade barriers and these things are eliminated. For example,
Mexico has been using sanitary and phytosanitary measures to
block the importation of U.S. potatoes into Mexico's cities
beyond those cities that are near our common border, where we
have been able to in the past. However, I am pleased to
announce that through the hard work of negotiation now, over
time Colorado potatoes will be allowed into Mexican cities with
populations of 100,000 or more.
Early estimates give the indication that revenue from
potatoes could be as high as $80 million, a truly fourfold
increase over the present situation. This is a prime example of
how SPS issues are used to prevent agricultural trade and how
they can be overcome with science and negotiation and have a
direct impact on American farmers. I ask you today to do all
you can to eliminate all SPS issues and other barriers to
agricultural trade.
As was mentioned, when it comes to trade, currently there
are three Ts that are in action and things that can be done.
One is TTIP, or Transatlantic Trade and Investment Partnership
Agreement. The other is the TPP, Trans-Pacific Partnership
Agreement, and the other is key as well, Trade Promotion
Authority. The TTIP negotiations between the U.S. and the
European Union are an opportunity to deal with many substantial
issues that impede U.S. and EU trade in agriculture, such as
longstanding barriers against conventionally raised U.S. beef,
ongoing restrictions against U.S. poultry and pork, and actions
that limit U.S. export of goods produced using biotechnology.
The U.S. and the EU are major international trading
partners in agriculture. Ten years ago, the EU was the third
largest designation for U.S. Ag products, but over the last
decade, this growth has been the slowest among our top ten
agricultural destinations. The EU is now the fifth largest
export, and in 2013 we exported to them $11.5 billion of
agricultural and food products, while they exported to us $17
billion of Ag products. This market needs to be increased, and
the TTIP is an opportunity to do so.
The other trade agreement, the TPP, deals with, of course,
specific countries, and in particular one of those important
ones is Japan. Japan is currently the fourth largest export
market to the United States with over $14 billion of trade.
This is important because Japan continues to do things that
restrict the trade based on SPS as well as non-tariff barriers.
The tariffs going into Japan need to be reduced. That is
something that can be done with this agreement, and hopefully
that will, in fact, happen.
The last and perhaps the most important thing is the Trade
Promotion Authority. If we negotiate these other agreements and
the Trade Promotion Authority is not available to quickly and
effectively put a stamp of approval by Congress on these
agreements, much of that effort can be wasted. I highly
encourage you to support the current Trade Priorities Act of
2014, which is H.R. 3830. It is a necessary and critical
component for a successful trade policy agenda.
While there are many challenges that yet remain, I again
thank you, Chairman Tipton, and the members of this
Subcommittee for the opportunity to testify to you today on
this important issue. American agriculture drastically needs
more market access that is free of SPS and non-tariff trade
barriers. American farmers and ranchers are the most productive
in the world. With market access, we can continue to provide
high quality products to markets throughout the world.
I look forward to answering any questions you may have.
Again, thank you.
Chairman Tipton. Don, thank you for your testimony.
And I would now like to be able to yield to my colleague,
Ms. Meng, for purposes of introduction of our final witness.
Ms. Meng. Thank you, Mr. Chairman.
It is my pleasure to introduce Tim Brightbill. Mr.
Brightbill is a partner in the international trade practice of
Wiley Rein, LLP, in Washington, D.C., where he represents
clients on all aspects of international trade law and policy,
including import trade remedies, global trade policy, and trade
negotiations. He is also an adjunct Professor at Georgetown
University Law Center and has provided advice to the U.S.
Government on ongoing trade agreement negotiations such as the
Trans-Pacific Partnership and the Transatlantic Trade and
Investment Partnership.
He is a graduate of Northwestern University and Georgetown
University Law Center. From 1994 to 1995, he served as counsel
to the House Committee on Small Business.
Welcome back, Mr. Brightbill.
STATEMENT OF TIMOTHY C. BRIGHTBILL
Mr. Brightbill. Thank you, Congresswoman. I appreciate
that.
Chairman Tipton, Ranking Member Murphy, members of the
Subcommittee, thank you for the opportunity to testify before
you today on the issue of unfair trade practices and barriers
facing small business exporters.
I practiced international trade law for almost 20 years,
and my practice has always focused on helping American
companies, American industries, and American workers. I have
worked with a variety of industries, including manufacturing of
everything from steel to solar panels, to school notebooks, to
heavy forged hand tools. I also work with many companies that
provide services, both here and abroad. My job is to help these
companies grow, prevent unfair trade practices from harming
them, and to help eliminate trade barriers overseas.
Small businesses face enormous challenges in the area of
international trade. Trade laws and regulations are
complicated. Trade remedy cases are expensive, as you have
heard, and trade barriers are becoming more pervasive and more
challenging all the time. As a result, it is probably not
surprising how few small businesses are able to become
substantial exporters of goods or services.
Let me list several of the challenges facing U.S. small
business exporters. First, dumping and subsidies. These are two
of the most pervasive unfair trade practices. Foreign
manufacturers often sell below cost to enter the U.S. market
and take market share away from domestic competitors.
Subsidies and government ownership of foreign competitors
facilitate this kind of unfair pricing. Small businesses are
forced to choose between cutting prices to match foreign
competition or giving up sales and market share. Notably the
antidumping and countervailing duty laws that address these
practices are complex, and the requirements for filing trade
remedy cases are difficult even for large companies.
There are many steps that Congress and the Commerce
Department could take to make the trade laws simpler and easier
to use for small businesses. I would be happy to discuss those
specific ideas later this morning.
I would also like to endorse the comments of Mr. Magnus
regarding the ENFORCE Act, which we hope will be passed and
signed into law this year.
Second is currency manipulation. This is a serious problem
that harms all U.S. exporting businesses, large and small. The
Peterson Institute for International Economics has called
currency manipulation the biggest subsidy of them all and
estimates that currency actions by China and more than 20 other
countries have increased the U.S. trade deficit by $200 billion
to $500 billion per year and that the United States has lost 1
million to 5 million jobs as a result of foreign currency
manipulation. If Congress wanted to take one trade-related
action that would create new American jobs, it would be to pass
legislation to investigate currency manipulation as a
countervailable subsidy.
Third is intellectual property theft. This is a pervasive
problem. It demands a serious response from the U.S. Government
and law enforcement. The United States took an important step
this week by filing criminal charges against the Chinese
military for cyber hacking. The U.S. companies targeted are at
the heart of American manufacturing of steel, aluminum, solar
and others, and I applaud the Administration for taking that
step; but the reality is that the Chinese government sees no
difference between military espionage and corporate IP and
trade secret theft, and there are thousands of U.S. companies
that are victims of these activities. As one expert has stated,
there are two kinds of U.S. companies, those that know they
have been hacked and those that just haven't figured it out
yet.
Fourth is the rise of state-owned and state-controlled
enterprises, another factor that is very harmful to small
business exporters. U.S. companies should not be forced to
compete with foreign governments, and while China is a big
problem in this area, there are many other economies that are
problems as well. We need to include strong, enforceable
disciplines on state-owned enterprises in all new trade
agreements including the TPP and the TTIP agreement. I would be
happy to discuss that later today as well. Finally, we need to
address the growing use of non-tariff barriers to shut down
trade. This can involve obvious measures like export taxes, but
also more subtle barriers like Customs regulations, import
licenses, and burdensome standards and certification
requirements, even SPS requirements as Mr. Shawcroft just
noted.
The United States has been very successful in reducing
tariffs worldwide, but those that want to protect their markets
are continually looking for new ways to shut out foreign
competition.
So thank you again to the Committee and the Subcommittee
for addressing this important issue today, and I would be happy
to answer any questions.
Chairman Tipton. Well, thank you all for your testimony
here this morning. I appreciate you again taking the time to be
able to be here.
I would like to begin some of our questioning, and Mr.
Shawcroft, I would like to be able to begin with you.
A number of Nations have imposed trade restrictions on GMO
crops, citing safety concerns. Do you believe science supports
these claims or are some of our trading partners claiming
safety as a dubious excuse to be able to limit the export of
American products?
Mr. Shawcroft. I think you have stated the problem
precisely. The science does not back up these claims. In fact,
it is just the opposite. Science proves that these GMO products
are safe. They have been through a rigorous testing, and it
goes back to a precautionary type of approach that in
particular the EU takes upon these things, and that that is it
is trying to prove the negative.
If there is no evidence that, in fact, they do not cause
this, instead of saying, well, the use of this product does
cause X, Y and Z, if you do have the proof that it does not
cause those kinds of things, that is a precautionary principle,
and that is I think true in the GMO case as well as other
things that the EU is concerned about. We are extremely about
the GMO case because there is a tremendous opportunity for
increased corn and soybean export to the EU, and that's an
important issue.
Chairman Tipton. I appreciate that, and while we are on the
issues for the San Luis Valley, you mentioned how potato
growers were able to successfully challenge unfair Mexican SPS
standards that restricted American potato exports. In this
case, is it an outlier, or is the WTO dispute resolution
mechanisms, are those adequate to be able to address
agricultural product barriers in a timely manner?
Mr. Shawcroft. I think that it is an effective avenue, but
it does take time and it does take money, just the same as the
other issues that have been discussed here by the other
witnesses. The cost is tremendous, and I applaud Mr. Magnus for
going through the effort of challenging those things rather
than just lying down and going on his own way and doing
something else.
WTO is a process. We need to support that process. We need
to make it something that is workable in a more expeditious
manner, just the same as TTIP and TPP need to have those types
of provisions where actions can be taken and that they can be
enforced and again, in a timely and effective manner.
Chairman Tipton. Do you believe that some of the future
multilateral trade agreements such as the proposed TPP and TTIP
should adopt similar SPS resolution mechanisms?
Mr. Shawcroft. I believe they need to. If they were to
follow the lead of the WTO and say that those SPS issues can
only be resolved based on science and that they need to have a
level of reasonability to their implication and the
implementation, I think that's important.
Chairman Tipton. You know, and I think you brought up an
important point. Mr. Magnus, how much money did you spend in
terms of trying to be able to defend yourself?
Mr. Magnus. An enormous amount. It is an ongoing process.
We have to go through administrative reviews every year, and
that is expensive also. It is well over $1 million to file a
trade case, and then it is a quarter of a million dollars just
to maintain them.
Chairman Tipton. Just out of your pocket?
Mr. Magnus. The Government doesn't pay for it, yes, sir. It
is out of my pocket.
Chairman Tipton. It is out of your pocket. The bottom line
either way you are paying for it, even if the Government pays
for it, so you have still got that challenge.
Mr. Magnus. Yes sir.
Chairman Tipton. Mr. Jhones, I appreciate you taking the
time to be able to be here and a lot of great opportunities
certainly for small businesses, small businesses like mine, to
be able to take advantage of the websites and to be able to
reach out of our different areas to be able to sell some of our
products, but it also appears that as you noted in your
testimony, ripe with opportunities to be able to counterfeit
some of these products.
eBay has its Verified Owner Rights program in place to be
able to prevent these counterfeits, but many other forum
websites, as I know you are aware, do not.
What actions do you believe that the government should take
to be able to prevent Web sites from carrying counterfeit
products?
Mr. Jhones. Well, we have found the huge bulk of our patent
infringements coming in over Chinese websites, auction sites;
and what we would like to see is just to have the same
expectations of those websites as far as being able to have an
infringing product taken off of it, the sale of infringing
product.
eBay responds to us now within eight hours if we notify
them of an infringement that is being sold as an auction.
Alibaba we almost don't get any response. Alibaba, DHgate will
make us prove our IP rights to an item that is on sale on their
website, whereas eBay they will just allow us to say we will
take liability for the case. If we say we have these pieces of
intellectual property and we are willing to sign off on the
liability issue for eBay, eBay will respond to us right away
and does so. They are quite good about that.
Chairman Tipton. You know, I am curious, Mr. Jhones, have
you been able to do any sort of an estimate in terms of what
you have lost in terms of counterfeiting?
Mr. Jhones. We had that discussion just before I came here.
Our financial losses are probably not what would be considered
to be significant. Where we really, really have concerns is
with losses with our reputation.
For example, a customer will buy a product off of a Chinese
website, or a secondary sale that's occurred from a product
that we know came in through a Chinese website but was sold for
example, at a store or flea market or a secondary sale, and
then they are calling us saying what is your customer service
going to do for this, it is broken. It has wounded me. It is
falling apart. It is a poor product, and then our reputation
winds up on the line because we have to tell that person that
is not our product. It is a clone. We are aware those are out
there. We apologize. We are working to cure that market, to
close that market up, but that is not our product. And you can
imagine that creates quite a bit of animosity in the customer-
business relationship.
Chairman Tipton. I can imagine. I don't want to belabor
this, but I am a little curious given what you just commented
where somebody wounds themselves. Have you had the threat of a
lawsuit when it wasn't your product?
Mr. Jhones. Well, no, because you know, it is not our
product. We are not in the chain of liability. But, of course,
we still have concern for the consumer. We have concern for the
people that thought that they bought our product. We have a
high-end product.
As I mentioned, a lot of our products find their way into
service in this country in law enforcement and in all of our
country's servants, and we are really quite concerned that some
of those people are going to get a hold of inferior product,
and they are not going to meet the standards and the
expectations that they have.
Chairman Tipton. All right, well, I appreciate that.
Mr. Brightbill, certainly hearing some of these comments, I
would ask you that they would probably appreciate it to be able
to provide some free legal counsel on some of these issues. But
what is the first thing that you would tell a small business
company like Spyderco or M&B Metal Products if they came to you
asking for help with intellectual property theft and dumping?
Mr. Brightbill. Well, I think there are a range of options
available. It is true that the trade remedy cases are very
expensive. They can be time-consuming. There are other ways to
address the problems, sometimes in negotiations, although that
can be difficult. There was the reference to negotiations with
Mexico. There are agencies that are out there willing to put
some effort in, whether it is Customs and Border Protection,
Commerce Department, the U.S. Trade Representative. We have had
good results sometimes just on a bilateral level talking to
another country, flagging a barrier that they have imposed
without having to bring a full case.
So, although sometimes trade remedy cases are necessary,
there are other ways sometimes to address the same problem and
hopefully get some results for companies that shouldn't have to
pay for this, and the Government can support them on it.
Chairman Tipton. Okay. I appreciate that.
Mr. Magnus, I thought it was curious in your testimony to
where you were able to stop the illegal importation through
legal remedy and awareness, but then it would pop up coming out
of a different country as well and it kind of reeked of Whack-
A-Mole. You put one down, and another would pop up somewhere
else.
You referenced that transshipping is a way that they are
using to be able to avoid the tariffs and trade laws. Do you
have some recommendations that you could make to Congress on
how to best and most effectively combat that.
Mr. Magnus. We do and we have in the ENFORCE Act. The
ENFORCE Act sets timelines, makes accountability where there is
none, and involves the private sector as well as Customs. It is
a tough job for Customs, but it is a black hole when we give
them something because we never hear back from them. We have
detailed it with the ENFORCE Act. Senator Wyden endorsed it,
and his staffers even in a half a day were able to set up
illegal transshipping schemes from China on hangers. They
emailed the Chinese producers to say, yes, we can't ship it
from China, but we can ship it from another country, and this
is your price. They don't respect our trade laws, and the
provisions of the ENFORCE Act that we have put before both the
Senate and the House details some steps to be taken.
Chairman Tipton. Yes, I am certainly aware of the ENFORCE
Act. Any of the other gentlemen, do you have any other comments
or thoughts in terms of how Congress can start to be pushing
back to make sure that our businesses, our jobs, are going to
be able to be protected?
Mr. Shawcroft. I would suggest that the principle of trust
but verify is a very important aspect in all of these
negotiations. As was mentioned or referred to the Mexico
situation and potatoes, that took a long time. That was a slow
process, and now what has to happen is we have to trust those
Mexican officials and what they have said they will do but,
follow through and make sure they, in fact, do that. I think
that's an important aspect.
Chairman Tipton. Mr. Brightbill.
Mr. Brightbill. Sure. With regard to Mexico, I wanted to
point out that a couple of industries we work with, notably the
steel industry, is facing a similar problem where Mexico has
introduced a new import licensing system that is holding up
steel shipments at the border and greatly increasing costs for
U.S. companies that are trying to export, large companies and
small companies.
And then just to highlight the ENFORCE Act one more time,
we have had a couple of cases as well where the circumvention
begins even before the trade case is over. We have brought
cases on school notebooks from China. Before you know it, they
are allegedly coming from Taiwan or some other country.
Another case we brought on steel grating, subway grating
like you walk on here in Washington, before the case had even
ended, all the exports from China had disappeared and they
started showing up from Malaysia. The only problem is Malaysia
doesn't make bar grating. So, this is the kind of problem that
companies face every day, and while Customs might bring a big
enforcement action after four or five years, what we really
need is enforcement of the antidumping duties right from the
start, and that is where the ENFORCE Act could really be
valuable to companies and industries like ours.
Chairman Tipton. Well, I appreciate again, gentlemen, your
comments. I would like to yield to my colleague, Ms. Meng for
her questions.
Ms. Meng. Thank you.
I have a question for Mr. Brightbill. Trade assistance is
administered by 20 different Federal agencies, each of which is
tasked with their own mission, their own set of policies, and
their own competing resources. What in your opinion would be
the quickest and most cost effective means of improving
coordination between these agencies and harmonizing their
export strategies? And anyone is free to answer.
Mr. Brightbill. Thank you for that question. I think this
committee and subcommittee have done a good job flagging the
issue that there are lots of resources out there, but they
overlap, and the missions are not always clear to companies out
there just trying to figure out how do I send my products
abroad to other countries.
So, I think there is a way to streamline and simplify and
try to not have so many different agencies trying to provide
aid so that its understandable to the companies who aren't
familiar with all of these different programs and efforts; so I
think this committee has done a good job flagging that as a
place to start.
Ms. Meng. And we frequently hear that small businesses make
up nine out of every ten businesses that export goods from the
U.S., but when it comes to the negotiating process for these
trade agreements, the interests of the small business community
often takes a back seat to that of the larger multinational
corporations. Is there anything that can be done to elevate the
concerns of these small businesses in going multilateral trade
negotiations?
Mr. Brightbill. I would just say to that that there is a
system of industry trade advisory committees that provide input
to the trade negotiators. I sit on one of those committees
relating to services, and there is a specific small business
committee that is open. Now that is one way that some of the
views can get across, but I do think the process needs to be
more transparent.
We are negotiating very significant, gold standard free
trade agreements. I think if the American public and American
businesses knew a little more of what was being negotiated,
they would support them strongly, and they would be enacted
into law once we reach these final agreements. But in the
meantime when the process is not particularly transparent, it
is very difficult to build support for them.
Ms. Meng. Yes.
Mr. Shawcroft. Yes. Thank you.
I would also like to comment the value on behalf of small
businesses in agricultural, organizations like the American
Farm Bureau and Colorado Farm Bureau who stand up for the needs
of those individuals and those small businesses in those
negotiations, that type of representation is important.
Ms. Meng. Thank you.
And as the U.S. continues to negotiate with its 11 partner
Nations on the terms of the TPP trade agreement, as you know
the Administration has been less than forthcoming with
specifics with trade talks resuming this week. What protections
are vital for your industries in any new agreement with Pacific
Rim countries?
Mr. Shawcroft. Yes. Thank you.
I would just say that foremost is the concerns that have
been expressed here today, the idea of having provisions there
that antidumping cannot happen, make sure that those
countervailing issues are resolved and particularly for
agricultural, the non-tariff type barriers, and the tariff
barriers, the SPS, sanitary and phytosanitary issues in
agricultural, those types of things need to be in that
agreement specifically and that there needs to be a viable and
easily accessed enforcement tool in those agreements.
Mr. Brightbill. Congresswoman, I would just add to that.
The issue of state-owned enterprises is a critical one. We
have not had SOE provisions in a free trade agreement before.
We need strong, enforceable disciplines there. Companies should
not have to compete with foreign governments, and they
shouldn't have to compete with foreign government investments,
whether or not it is coming here or in a third country, and so
we need strong, enforceable disciplines. State-owned
enterprises should not receive preferential legal or regulatory
treatment. They shouldn't receive subsidies, and we should have
a way to be able to ask questions of these state-owned
enterprises and get information. That is the least we can do in
a free trade agreement like the TPP or the TTIP.
Ms. Meng. If the TPP is ratified, would U.S. beef producers
create more jobs as a result of it, or would the benefits flow
mainly to foreign producers?
Mr. Shawcroft. I would certainly expect that in
agricultural, in particular beef, that the advantage would be
to us. There is much of the beef production today goes
internationally because, quite frankly, most American consumers
are not interested in consuming that part of the animal, as
well as particularly the impact of the high-end cuts when it
comes to steaks and prime rib roasts and those types of things
in the beef trade.
That demand is, in fact, global and so those products move
across the world. The more demand that there is with growing
economies and emerging economies around the world, I can see
that, I would certainly hope, at least and believe, in fact,
that those prices would increase because of this agreement once
they were ratified by Congress.
Ms. Meng. Question for Mr. Magnus or again anyone is
welcome.
When I talk to small firms in my district, the barrier they
most commonly raise is not necessarily stiff tariffs on exports
but finding affordable credit to support their export business.
Do you believe that the Government's current mix of trade
financing programs meets the needs of small firms?
Mr. Magnus. I will have to decline answering that. I am not
fully versed on that. Most of our trade issues are dumping
coming this way, not being able to export. Because many other
Nations don't have dumping duties on Chinese hangers, it is
very difficult for us to compete in foreign countries because
of the low-priced Chinese hangers in foreign countries.
Mr. Brightbill. On the financing issue, there are financing
programs available through the Government. I think this
committee has emphasized private investment in private
financing as well, which is important. One concern we have is
when Ex-Im Bank provides financing abroad, in areas where there
is already overcapacity, like steel or raw materials that then
goes into steel coming back here, so that is a particular
concern where the financing is subsidizing or benefitting
excess capacity abroad that then is going to come back here and
compete with U.S. companies.
So, but in general I think there are financing options
available. It is still difficult for companies and small
businesses in particular to get credit. Many of my clients
which are in a weakened condition when they are bringing these
dumping cases, also have difficulty in terms of financing and
credit to grow their businesses, so that is still of an
important area of concern.
Ms. Meng. Thank you.
I yield back, Mr. Chairman.
Chairman Tipton. And I appreciate the question,
particularly on some of the access to capital issues.
We have got a bill that I am cosponsoring called Capital
Access to Main Street to be able to actually allow banks to
eliminate some of the regulatory requirements to be able to do
a look-back on seven years of financial statements, P and Ls,
balance sheets, to be able to make a good business decision.
When we talk about are farm and ranch community, the crops can
be flooded out, frozen or burned, but in that fourth year when
the commodity prices are up, it is going to come back. We just
need to be able to free up some of these banking options and
let bankers be bankers, I think frankly to be able to address
some of that.
Since we have got just a couple of minutes I think before
votes are going to be called, Mr. Magnus, your company has
filed more than 30 e-allegations with the Customs service once
you discovered that Chinese manufacturers were circumventing
the antidumping duties. What kind of response did you receive
from the agency?
Mr. Magnus. We received none except when we would meet with
them they would say that we received your e-allegations but
because of the laws we cannot report on what we are doing on
them.
So they really, once you file an e-allegation, you have no
idea whether they look at it, whether they act on it, or
whether they throw it in the trash can.
Chairman Tipton. So the answer is nothing.
Mr. Magnus. Nothing.
Chairman Tipton. Absolutely nothing.
Mr. Magnus. Absolutely nothing.
Chairman Tipton. Would you remind me again how many
Americans you employ?
Mr. Magnus. In Alabama we employ between 80 and 90.
Chairman Tipton. Okay, great. That is some good information
for us.
And, Mr. Jhones, has your company attempted to be able to
avail itself of any of the intellectual property remedies
through the ITC, and have you been made aware of some remedies
that are potentially available to you.
Mr. Jhones. We have pretty much fairly recently have become
aware of the ITC. We have a quite cyclical sales. Fourth
quarter is quite high for us. If we were to request Customs to
stop a shipment of infringing product and they were to stop one
of our shipments, remembering that these are clones, that could
very well put Spyderco out of business.
It is a very large concern with us and we have had some of
the same responses to our concerns with Customs that Mr. Magnus
has had. We haven't had a lot of response. We have had, quite
frankly, rumors; and competitors in our industry discuss the
same problem, and they feel like Customs is somewhat
unresponsive to them.
We have a large fear that if we were to request assistance
there, that some of our stuff would get stopped, and we
wouldn't have the ability to continue business basically. Our
American production will not support us at this time, although
we are trying to get that ramped up. So it is a bit of a
fearsome situation.
Chairman Tipton. So you aren't feeling a lot of support in
that area?
Mr. Jhones. No. Sorry.
Chairman Tipton. No. That is good for us actually to be
able to know.
You know what, it took this administration more than two
years to be able to submit the Korea, Panama and Columbia free
trade agreements to the Congress, and during that period of
time, these Nations that just cited the ratified trade
agreements with other Nations, resulting in American farmers
losing a substantial market share to their competitors.
Mr. Shawcroft, do we need to be able to guard against
something similar happening while we negotiate this Trans-
Pacific partnership and Transatlantic agreements?
Mr. Shawcroft. We do. I am not real sure what you can do to
keep other people from taking advantage of an opportunity other
than to move quicker and, in fact, for Congress to take action
and approve a trade promotion agreement.
So that once those negotiations have taken place, it can be
ratified quickly without a lot of discussion about what the
individual terms of it are. I know it is sometimes somewhat
perceived as a two-edged sword when you have a trade promotion
authority because not everybody will be happy with it, but it
is something that we have to rely on those negotiators; and if
there is a little bit of emphasis that it needs to be done
quickly by Congress and for example, yourselves in these
Subcommittee, who can influence the expeditiousness of that, I
think it needs to be done.
Chairman Tipton. Well, thank you.
And, gentleman, I would like to take you all for taking the
time.
Ms. Meng, did you have any other further questions to
follow-up on.
I want to thank for taking the time to be here. This has
provided us with some good information in terms of the
responsiveness and lack thereof by the government in terms of
being able to protect American jobs and to be able to expand
those opportunities to create more jobs. I know in our district
that's a number one issue, jobs and the economy, the people are
concerned about and our opportunities to be able to export. We
have the empirical evidence when those are present, and we have
the opportunity to be able to do it in a fair way. We actually
benefit the American consumer and certainly American families
in that process.
You have all provided some very important insight to that
and how unfair foreign trade practices are actually impacting
our small businesses. This insight will assist us in Congress
in our efforts to be able to ensure that foreign nations and
companies play by the rules so that we are going to be able to
compete on a level playing field, which is I think all that we
ask for.
I would like to able to ask for unanimous consent that
members and the public have five legislative days to be able to
submit comments and supporting materials into the hearing
record.
Hearing no objection, so ordered, and this hearing is now
adjourned. Thank you again, gentleman, for your time.
[Whereupon, at 10:30 a.m., the subcommittee was adjourned.]
A P P E N D I X
Milton Magnus Testimony
House Committee on Small Business
May 22, 2014
Good Morning, my name is Milton Magnus, and I am President
of M&B Metal Products Company, Inc. of Leeds, Alabama. We
manufacture wire Garment Hangers in Alabama. I am also the
President of the American Wire Producers Association, an
association of U.S. companies that purchase steel wire rod and
produce wire and wire products of all types. I am testifying
today to explain the constant struggles that small and medium
size manufacturers face with unfair trade.
In 2002, my company, M&B, along with two other U.S. hanger
producers saw a flood of Chinese-made hangers entering the
United States at prices below our cost. We decided to file a
Section 421 Trade Case, which is one avenue for relief for US
producers that are being harmed by imports from China. China
agreed to this special procedure when they entered the WTO. We
were successful in our case at the International Trade
Commission (ITC); but--unlike an antidumping or countervailing
duty case--a Section 421 case has to go to the President for
approval. Unfortunately, no relief was granted to our industry.
Shortly after that, Cleaners Hangers--an American company,
which was the largest Garment Hanger producer in the world--
filed for Chapter 7 bankruptcy, and all of their assets were
sold at auction. Then it seemed like dominoes--all of the
remaining US wire hanger producers, with the exception of M&B,
either went out of business or closed their US operations and
imported all of their hangers from China. Over the next few
years, we struggled, having to close one of our US plants in
South Hill, Virginia and lay off 85 hardworking Americans. We
continued our struggle for another year, but the Chinese were
relentless, and eventually we either had to join the club and
import 100% of our hanger sales or fight by filing an
antidumping petition against China. We chose to fight.
On July 31, 2007, we filed an antidumping petition against
unfairly traded Chinese hangers. When we filed, we were almost
out of business, and we really didn't know how we were going to
pay the substantial legal fees and other costs to file this
case, but we proceeded anyway. At the end of a long and
demanding process before the ITC and Department of Commerce
dumping duties between 16% and 187% were imposed on imported
hangers from China.
Things improved almost immediately. We were able to pass
along raw material increases. Our margins improved, and things
were progressing as we had hoped. But, as we were hiring again
and increasing our production, the same producers that were
shipping hangers directly from China were working on illegal
schemes to avoid dumping duties by shipping hangers through
other countries, or simply just changing the country of origin,
and they continued to dump hangers in the U.S. market. We filed
over 30 e-allegations with US Customs and Border Protection
(Customs) with specific information about these illegal
schemes, and we met with Customs officials a number of times
detailing that was happening, but we saw no progress.
We then hired an investigator at great cost to our small
company and sent him to Taiwan and Vietnam to visit the so-
called new factories that were shipping hundreds of millions of
hangers to the US. Guess what, he didn't find any hanger
factories. He even had detailed offers from Chinese producers
to illegally transship Chinese hangers to the US through Taiwan
and Vietnam, avoiding the dumping duties that should have been
collected. When our investigator returned, we took him, his
reports, and our attorneys and met with Customs as well as
Immigration and Customs Enforcement, ICE, to detail the
schemes. I felt really good when we left this meeting. Both
Customs and ICE complimented us on the detailed reports and
told us how much they appreciated the information. Days, weeks,
and months went by, and except for a small importer in Mexico
that was caught transshipping Chinese hangers across the
border, we saw no other action being taken.
We then filed Anti-circumvention petitions against two so-
called hanger producers in Vietnam. We won those cases also,
but with the help of the Chinese producers, hanger imports from
Vietnam and Taiwan continued to grow. We had no choice but to
file another antidumping petition against Taiwan, and an
antidumping petition and countervailing duty petition against
Vietnam. We won those cases as well, but immediately hangers
started appearing from Laos and Malaysia. We have been told
that these hangers were made in Vietnam or China. We decided
not to file more e-allegations or send investigators to these
countries to bring back proof of duty evasion because we had
tried that but saw no results from our previous efforts.
Customs continues to be a black hole when it comes to
commercial enforcement to the detriment of US manufacturing and
workers and at great cost to the US Treasury.
In addition, the costs associated with fighting for our
dumping order continue to add up. Each year Chinese producers
or exporters can ask Commerce to recalculate their dumping
margins. We are in the midst of our fifth review. While each
review involves additional costs to our company we have to
participate in order to ensure the dumping margins remain
accurate and effective. As the result of the first four
reviews, all but two Chinese hanger producers will have a
dumping margin of 187%. I should be very excited by these
results and begin adding employees and equipment, but I am very
cautious because I already have heard that Chinese hangers are
now being transshipped through Cambodia and Sri Lanka. I fear
that we will have to start this never-ending, expensive process
all over again.
We also see no aggressive action on Customs to collect
duties that are owed. In the US, we operate on a Retrospective
System, which means the final dumping rate is determined after
the products have been imported. The importer only pays an
estimated dumping margin, or deposit, when they import the
product. After the Administrative Review, the final dumping
margin is set and Customs is required to either refund any
excess deposit paid, with interest, or collect the additional
duty, with interest. We have seen in the past that Customs is
quick to return overpayment, but slow (many times never)
collect the additional duty. This not only hurts the US
Treasury, but it shows that Customs will NOT enforce our
Dumping Orders.
M&B, along with other producers experiencing the same
evasion schemes, formed a coalition to try to get meaningful
legislative and policy changes passed to address these illegal
activities. The Enforcing Orders and Reducing Customs Evasion
(ENFORCE) Act creates a procedure at Customs to investigate
claims of evasion, including timeliness for Customs to make
determinations and apply the appropriate duties as well as
regular, timely reports that will not only deter future evasion
but add transparency, accountability and oversight where there
currently is none. The provisions of ENFORCE passed through the
Senate Finance Committee by voice vote and have been included
in the Senate Customs Reauthorization bill. The complimentary
bill in the House, introduced by Representatives Long and
Sanchez, has a bipartisan group of 46 co-sponsors.
As I said at the beginning, there are many other industries
besides the garment hanger industry that face the same
struggles with cheating, illegal transshipment, and evasion
under their trade orders. They include the Nail industry, the
innerspring industry, the threaded rod industry, the PC Strand
industry, the wire shelving industry, and many more.
I see manufacturing in the US as a privilege. We all
produce with a high degree of integrity, which includes paying
our workers a fair wage with good benefits, being
environmentally responsible, paying income taxes, and providing
a return on investments to our owners. Without meaningful
relief to ongoing duty evasion schemes, it will continue to be
difficult to maintain our production in the US.
Thank you for your time. I welcome your questions.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Hearing on
Combating Unfair International Trade Practices:
Barriers and Obstacles for Small Business
Presented to:
U.S. House of Representatives
Committee on Small Business
Subcommittee on Agriculture, Energy and Trade
On behalf of
Spyderco, Inc.
May 22, 2014
By Peter H. Jhones
Chairman Tipton, Ranking Member Murphy, and Members of the
Subcommittee, thank you for the invitation to appear today.
Spyderco Inc. Introduction
Spyderco has designed, manufactured and distributed some of
the highest quality and most innovative folding knives and
related products in the world. The company was built from
nothing by its founder Sal Glesser and his family. The company
now employs more than 80 individuals in its Golden, Colorado
facilities and generates more than $20 million dollars annually
for the Colorado economy. Spyderco has been awarded 33 U.S.
trademarks (60 overseas), 29 U.S. utility patents (11 overseas)
and 48 U.S. design patents (12 overseas).
Spyderco customers have come to rely upon the high
performance, superior engineering and ergonomic designs of the
Spyderco products they use daily. These customers include
virtually all of this Country's military branches. Special
Services, and Federal Law Enforcement Agencies. Our products
are also in service at every level of state and local law
enforcement. We sell our products throughout the United States
and to 57 countries around the world. A significant portion of
our manufacturing is performed in Golden, Colorado and we are
in the process of tripling that capacity.
Unfair Practices: Chinese Counterfeits
The safety and reliability of the tools used by our
country's servants should not be called into question. However,
that is exactly what is now happening. An alarming increase in
clones, knock-offs and infringing product made by Chinese
companies is flooding the U.S. market. The Chinese counterfeit
knives of which we have become aware, are anything but an exact
duplicate of our genuine items. These products are made using
inferior materials and demonstrate poor engineering techniques.
They make for a dangerous and unreliable tool for service
personnel and consumer alike. The problem is these copied
products have reached a level of outward appearance which makes
it difficult even for our own staff to tell a genuine Spyderco
knife from a fake.
Obstacles and Solutions
Spyderco does its best to police the marketplace, seeking
to remove copies from the stream of commerce. For the most
part, Spyderco has been successful in these activities,
stemming the flow of counterfeit product being sold through
U.S. based sales entities. However, we are having difficulty
stemming he sales of counterfeit product sold through Chinese
distribution outlets. Indeed, the bulk of these copies are
entering the stream of commerce through on-line auction sites;
primarily Alibaba, TaoBao and DHgate. The first appearing page
of a ``Spyderco'' search of DHgate and Alibaba is attached. No
item therein is an authenic Spyderco Inc. product. These
Chinese owned sites have incredibly poor or absolutely no
response to requests to remove auctions of counterfeit goods.
In contrast, the famous on-line auction house eBay has
developed their Verified Rights Owner (VeRO) program to combat
just this issue. Utilizing more of a storefront format,
Amazon.com also keeps a tight rein on infringing products,
preventing their entrance into the Amazon.com stream of
commerce.
The costs associated with trying to remove unauthentic
products from Chinese sales websites are now prohibitive. As
with all small business operations, availability of funds to
fight an infringement war are limited. Every dollar diverted
for the effort to protect the marketplace from unsafe clones
and patent infraingements, takes money's slated to be invested
in corporate activities; increasing production capacity,
research and development, additional employees, machinery
acquisition, wage increases, etc. As a result, copies of many
of our core products are now available on these sites at
significantly lower prices than for which our authentic
products can be offered.
As I am sure we all realize, it is impractical for U.S.
Customs and Border Patrol to inspect every package for IP
infringements. If all manufactuers selling products into
America, domestic and international alike, were subject to the
same intellectual property enforcement standards, this problem
would be alleviated. All internet auction sites should be
required to have an infringement notification and removal
system that works. This would level the playing field between
the U.S. and Chinese owned internet auction and commerce sites.
It would also provide an ideal point for IP holders to review
and stop the offer-for-sale of infringing items being put into
commerce worldwide.
Spyderco agrees that it is important for the U.S. to
continue embracing free trade principles with our trading
partners. However, it is imperative that these partners respect
and enforce American intellectual property rights. Spyderco
respectfully requests this Subcommittee and the United States
Congress to implement laws and treaties which require all
websites viewable within the United States to publish and
enforce strong Intellectual Property protection mechanisms
similar to the eBay VeRO system, and to require our trading
partners to respect and enforce American intellectual property
rights.
Thank you
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
STATEMENT OF DON SHAWCROFT
PRESIDENT-COLORADO FARM BUREAU
before the
COMMITTEE ON SMALL BUSINESS
SUBCOMMITTEE ON AGRICULTURE, ENERGY AND
TRADE
U.S. HOUSE OF REPRESENTATIVES
MAY 22, 2014
Chairman Tipton, members of the subcommittee, thank you for
holding this hearing.
My name is Don Shawcroft, President of the Colorado Farm
Bureau. I am a rancher from the San Luis valley in Colorado. I
am a board member of the American Farm Bureau Federation. Farm
Bureau is the largest agriculture based grassroots organization
in the country. Our membership is made up of 6 million farmers
and ranchers growing everything you can think of--from
alligators to zucchini and everything in between.
Trade is vitally important to agriculture. According to the
Economic Research Service (ERS) at the United States Department
of Agriculture (USDA),
``U.S. agricultural exports generated employment,
income, and purchasing power in both the farm and
nonfarm sectors. ERS estimates that each dollar of
agricultural exports stimulated another $1.29 in
business activity in 2011. The $136.4 billion of
agricultural exports in 2011 produced an additional
$176 billion in economic activity for a total economic
output of $312.3 billion. Every $1 billion of U.S.
agricultural exports in 2011 required 6,800 American
jobs throughout the economy. Calendar year 2011
agricultural exports required 923,000 full-time
civilian jobs, which included 637,000 jobs in the
nonfarm sector. The agricultural export surplus helped
to offset some of the nonagricultural trade deficit.''
\1\
---------------------------------------------------------------------------
\1\ http://www.ers.usda.gov/data-products/agricultural-trade-
multipliers/2011-data-overview.aspx#.U3OS7YFdVyl
These are not just high level impacts either. On the ground
farmers and ranchers in Colorado, Kansas, Iowa and states all
over the United States feel the positive impact of trade.
However, with every positive, there is always a negative. One
challenge that we are facing in agriculture is the use of non-
---------------------------------------------------------------------------
tariff trade barriers.
This issue can be illustrated through Mexico's use of
Sanitary-Phytosanitary (SPS) measures to block the importation
of U.S. potatoes into Mexico. This issue caused hardship for
U.S. potato growers and Colorado potato growers specifically.
Colorado farmers send about seven truckloads of potatoes a day
to Mexico--that's nearly 2,000 truckloads a year for only 5
percent of all the potatoes shipped.\2\ However, I am happy to
announce that through work and negotiation Colorado potatoes
will now be allowed to be export potatoes to Mexican cities
with populations of 100,000 or more. Early estimates give the
indication that revenue from potatoes could be as high at $80
million, a four-fold increase. This is money that comes back to
farmers.
---------------------------------------------------------------------------
\2\ http://www.cpr.org/news/story/new-trade-deal-mexico-good-news-
colo-potato-farmers
I provided this example because it is a good illustration
of how SPS issues are used to prevent agriculture trade and the
---------------------------------------------------------------------------
negative impacts that it can have at the farmgate.
While potatoes are a success story of how science has
prevailed, agriculture still see impacts of SPS barriers being
used against U.S. products. There continue to be simmering
issues between the European Union (EU) and the U.S. pertaining
to the production of beef and the use of hormones. This ban is
an example of how SPS measures and non-tariff barriers are used
as disguised protectionism, primarily intended to restrict
imports from other countries.\3\
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\3\ http://www.fas.org/sgp/crs/row/R40449.pdf
However, the Transatlantic Trade and Investment Partnership
is a mechanism that can help to alleviate this problem. Farm
Bureau supports efforts to increase agricultural trade flows
and remove trade barriers that currently exist between the
---------------------------------------------------------------------------
United States and the European Union.
The Transatlantic Trade and Investment Partnership (TTIP)
negotiations between the U.S. and the EU must deal with the
many substantive issues that impede U.S.-EU agricultural trade,
such as long-standing barriers against conventionally raised
U.S. beef, ongoing restrictions against U.S. poultry and pork,
and actions that limit U.S. exports of goods produced using
biotechnology.
The U.S. and the EU are major international trading
partners in agriculture. U.S. farmers and ranchers exported
more than $11.5 billion worth of agricultural and food products
to the EU in 2013, while the EU exported more than $17 billion
worth of agricultural products to the U.S. last year.
Despite this impressive sum, just 10 years ago, the EU was
the third-largest destination for U.S. agricultural exports.
Today, it has fallen to our FIFTH-largest export market. Over
the last decade, growth of U.S. agricultural exports to the EU
has been the slowest among our top 10 export destinations. If
U.S. farmers and ranchers were provided an opportunity to
compete, the EU market could be a growth market for them.
Regulatory barriers have become a significant impediment to
that growth. Unless these trade barriers are properly addressed
within the TTIP negotiations, they will continue to limit the
potential for agricultural trade. It is imperative that TTIP be
a high-standard trade agreement that covers all significant
barriers in a single, comprehensive agreement. Scientific
standards are the only basis for resolving these issues.
Continuing barriers to the export of U.S. beef, pork and
poultry, along with the slow approval process for biotech
products, are major areas of interest to the U.S. in the TTIP
negotiations. Both the U.S. and the EU adhere to the World
Trade Organization's Agreement on SPS measures. These measures
states that measures taken to protect human, animal or plant
health should be science-based and applied only to the extent
necessary to protect life or health.
Continuing barriers to the export of U.S. beef, pork and
poultry, along with the slow approval process for biotech
products, are major areas of interest to the U.S. in the TTIP
negotiations. Both the U.S. and the EU adhere to the World
Trade Organization's Agreement on Sanitary and Phytosanitary
Measures, which states that measures taken to protect human,
animal or plant heath should be science-based and applied only
to the extent necessary to protect life or health. The U.S.
follows a risk-assessment approach for food safety. The EU is
additionally guided by the ``precautionary principle,'' which
holds that where the possibility of a harmful effect has not
been disproven, non-scientific risk management strategies may
be adopted.
The use of the ``precautionary principle'' is inconsistent
with the WTO SPS Agreement and is used as a basis for
scientifically unjustified barriers to trade. The TTIP
negotiations must result in a modern, science- and risk-based
approach, based on international standards that can truly
resolve SPS disputes. SPS issues must be directly addressed as
a part of the negotiations, and these provisions must be
enforceable.
The EU approach for approving products of biotechnology
combines a lengthy approval process with the ability of EU
member states to ban approvals. The result in restrictive
import policies and substantial reductions in U.S. exports of
corn and soybeans to the EU.
Furthermore, is it not just SPS issues that present non-
tariff trade barriers to agricultural trade. An example of one
of these issues is the EU system of geographic indications for
foods and beverages designates products from specific regions
as legally protected for original producers. The use of these
markers will prevent forward looking U.S. farmers and ranchers
from developing products for a marketing program which would
allow then to capture the value added through processing. The
U.S. has opposed recognizing geographical names for foods when
it would inhibit the marketability or competitiveness of U.S.
products. The TTIP must not become an avenue to erect a new
barrier to U.S. agricultural exports through the use of
geographic indications...pretty sure salami is salami no matter
where it is made.
Negotiations on bilateral concerns move in both directions.
There must be positive outcomes for all sides. The European
Union has concerns about U.S. rules on EU beef and dairy
products. An emphasis on finding trade-opening solutions to
sanitary barriers will assist in resolving our many trade
issues.
In addition to resolving non-tariff barriers to trade, the
TTIP negotiation proposal also calls for the elimination of
tariffs. The average U.S. tariff on imported agricultural
products is 5 percent, with 75 percent of our tariff lines at
between zero and 5 percent. For the EU, the average tariff is
14 percent, with 42 percent of tariff of lines at zero to 5
percent. In order to expand market opportunities for U.S.
agricultural products in the EU, tariff reductions will be
necessary.
We call for an ambitious agreement that addresses the real
barriers to the growth of agricultural trade between the United
States and the EU, both in the form of tariff and non-tariff
barriers. The European Union's 28 members account for 19% of
world imports and exports \4\ and in 2012 consumed $458 billion
in goods and private services from the U.S.\5\
---------------------------------------------------------------------------
\4\ http://ec.europa.eu/trade/policy/eu-position-in-world-trade/
\5\ http://www.ustr.gov/about-us/press-office/fact-sheets/2013/
june/wh-ttip
While the EU presents U.S. farmers and ranchers with very
real potential for a major new market, TTIP is not the only
trade deal that has the potential to help farmers and ranchers
through reductions in tariff and non-tariff trade barriers to
---------------------------------------------------------------------------
trade.
The Trans Pacific Partnership (TPP) is the other major
regional trade negotiation for the U.S. TPP consists of
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore, Vietnam in addition to the United
States. The addition of Japan to full participation in the TPP
talks enhances the significance of the negotiations and makes
the agreement much more encompassing of North American goals
for agricultural trade. It will also fuel interest among other
Asia-Pacific nations for similar opportunities to improve trade
relations with the U.S. and other participating countries.
Japan is the fourth-largest agricultural export destination for
the U.S. with more than 12.4 billion dollars in sales in 2013.
Again despite our trade success in Japan, the country
maintains several restrictive policies that inhibit U.S.
exports, such as high tariffs on dairy, horticulture, rice and
other products, along with various SPS barriers. By joining the
TPP negotiations under the same conditions as other
participants, Japan must negotiate to resolve long-standing
trade barriers for all agricultural products thus benefitting
U.S. farmers and ranchers.
The TPP will only fulfill its promise of improved and
increased trade in the Pacific region by including the
elimination of tariffs on agricultural products.
While TTIP and TPP offer ways for the U.S. to deal with SPS
and other non-tariff trade barriers through the framework of
trade deals, they are not the only option for the U.S. As a
member of the World Trade Organization (WTO) U.S. agriculture
must continue to seek a commercially meaningful outcome through
expanded market access from WTO negotiations. We must remain
committed to advancing the goal of trade liberalization and
increased opportunities for real trade growth. The U.S. wants
an outcome to trade negotiations in the WTO that will open new
markets around the world, produce new trade flows and grow the
global economy. We can achieve this outcome by negotiating on
the basis of a new agenda, not be reliving the failures of the
past. Lastly, Farm Bureau has long supported trade promotion
authority (TPA) in order to complete and pass into law trade
agreements. For our important TPP and TTIP negotiations to move
forward, to maintain the focus on improving and expanding trade
between our negotiating partners, we need to have TPA in place.
Agricultural market access measures are usually finalized
at the end of negotiations when the certainty of TPA is crucial
to a successful negotiation. We urge the House to pass the
Bipartisan Congressional Trade Priorities Act of 2014, HR.
3830, as a necessary and critical component for a successful
trade policy agenda. While we understand that the Small
Business committee is not the primary committee of jurisdiction
for H.R. 3830, the committee can sever as an excellent conduit
for support of H.R. 3830. They can do this by sharing the
challenges faced by small business and small agribusiness with
the House Ways and Means committee as they move this
legislation.
While many challenges continue to present themselves, 2013
was not without some successes. 2013 saw expanding U.S. beef
exports by 12 percent to reach over $6 billion by expanding
access for U.S. beef to Japan, the European Union, Indonesia,
Mexico, Panama, and the Dominican Republic. In 2013, the
European Union also opened its market to live swine. Peaches,
nectarines, and cherries may now be exported to Australia and
Japan. These increases were the result of the removal their
unwarranted SPS measures.\6\
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\6\ http://www.ustr.gov/sites/default/files/FINAL-2014-SPS-Report-
Compiled.pdf
I thank you Chairman Tipton for the opportunity to testify
today on this important issue. American agriculture drastically
needs more market access that is free of SPS and non-tariff
trade barriers. American farmers and ranchers are the most
productive in the world. With market access, we can continue to
provide high quality products to markets throughout the world.
I look forward to answering any questions you may have.
House Committee on Small Business
Subcommittee on Agriculture, Energy, and Trade
``Unfair Trade Practices: Addressing Barriers Facing Small
Business Exporters''
Testimony of Timothy C. Brightbill
Partner, Wiley Rein LLP, Washington DC
Adjunct Professor, Georgetown University Law Center
May 22, 2014
Chairman Tipton, Ranking Member Murphy, and Members of the
Subcommittee. I am Tim Brightbill, a partner at Wiley Rein LLP
and adjunct professor at Georgetown University Law Center.
Thank you for the opportunity to testify before you today on
the issue of unfair trade practices and barriers facing small
business exporters. (These views are my own, not those of my
firm or my clients.)
I have practiced international trade law for almost 20
years, and my practice has always focused on helping American
companies, American industries, and American workers. I have
worked with a variety of industries--including manufacturers of
everything from steel to solar panels to school notebooks to
heavy forged hand tools. I also work with many companies that
provide services both here and abroad. My job is to help these
companies grow, to prevent unfair trade practices from harming
these companies, and to help eliminate trade barriers overseas.
Small businesses face enormous challenges in the area of
international trade. While all U.S. companies face trade
barriers and unfair trade practices, these problems can be even
greater for small- and medium-sized businesses. Trade laws and
regulations are complicated, trade remedy cases are expensive,
and trade barriers are becoming more pervasive and more
challenging all the time.
As a result, it is probably not surprising how few small
businesses are able to become substantial exporters of goods
and services. Let me list several of the challenges facing U.S.
small business exporters, as well as all U.S. companies:
1) dumping and subsidies - are two of the most
pervasive unfair trade practices. Foreign manufacturers
often sell below cost to enter the U.S. market and to
take market share away from domestic competitors.
Subsidies and government ownership of foreign companies
facilitate this type of unfair pricing. Small
businesses are forced to choose between cutting prices
to match foreign competition, or giving up sales and
market share. Notably, the antidumping (AD) and
countervailing duty (CVD) laws that address these
unfair practices are complex and the requirements for
filing trade remedy cases are difficult for even large,
sophisticated companies. There are many steps that
Congress and the Commerce Department could take to make
the trade laws simpler and easier to use for small
businesses. I would be happy to discuss these specific
ideas with the subcommittee later this morning.
2) currency manipulation - is a serious problem that
harms all U.S. exporting businesses, large and small.
The Petersen Institute for International Economics, one
of the most respected think tanks in Washington, has
called currency manipulation ``the biggest subsidy of
them all,'' and estimates that currency actions by
China and more than 20 countries have increased the
U.S. trade deficit by $200 billion to $500 billion per
year, and that the United States has lost 1 million to
5 million jobs as a result of foreign currency
manipulation. If Congress wanted to take one trade-
related action that would create the most new American
jobs, it would be to pass legislation directing the
Commerce Department to investigate currency
undervaluation as an illegal subsidy.
3) intellectual property theft - is a pervasive
problem that demands a serious response from U.S.
government and law enforcement. The United States took
an important step this week by filing criminal charges
against five members of the Chinese military for cyber
hacking. The U.S. companies named as victims in this
week's indictments are at the heart of American
manufacturing of steel, aluminum, solar, and others. I
applaud the Administration for taking this step. But
the reality is that the Chinese Government sees no
difference between military espionage and corporate IP
and trade secret theft. And there are thousands of U.S.
companies that are victims of these activities. As one
expert has stated, there are two kinds of U.S.
companies--those that know they've been hacked, and
those that just haven't figured it out yet.
4) the rise of state-owned and state-controlled
enterprises is another factor that is harmful to small
business exporters. U.S. companies are forced to
compete not with private companies, but with foreign
governments. And while China is also a notable example
of this problem, SOEs play substantial roles in the
economies of many countries--Russia, Brazil, Indonesia,
India, Malaysia, and many others.
We need to include strong, enforceable disciplines on
state-owned enterprises in all new free trade agreements,
starting with the Trans-Pacific Partnership and the T-TIP
agreement with the European Union. I would be happy to discuss
what specific terms and conditions we need to include in these
trade agreements in order to help U.S. small businesses
compete. And, if we are serious about addressing SOEs, we
should include such provisions in any bilateral investment
treaty with China as well.
5) Finally, we need to address the growing use of
non-tariff barriers to shut down trade. This can
involve obvious measures like export taxes, but also
more subtle barriers like Customs regulations, import
licenses, burdensome standards and certification
requirements that can become technical barriers to
trade. The United States has been very successful in
reducing tariffs worldwide, but those that want to
protect their markets are continually looking for new
ways to shut out foreign competition.
Thank you for addressing this important issue today, and I
would be happy to answer any questions.
-END-